Minister of Trade and Industry and Others v Nieuwoudt and Another

• Jurisdiction: South Africa
• Judge: Baker J, Friedman J and Tebbutt J
• Judgment Date: 30 November 1984
• Citation: 1985 (2) SA 1 (C)
• Hearing Date: 26 November 1984
• Court: Cape Provincial Division

Baker J:

This is an appeal against an order granted on 14 C November 1984 by AARON AJ.

For convenience the appellants and respondents in this matter will be referred to by their title and names respectively, to wit first appellant (the Minister of Trade and Industries, the Honourable Dawid de Villiers, first respondent in the Court a quo) as "the Minister"; second appellant (J H Coetzer, second D respondent in the Court a quo) as "Coetzer"; third appellant (D H Rheeder, third respondent in the Court a quo as "Rheeder"; first respondent on appeal (A A Nieuwoudt, first applicant in the Court a quo) as "Nieuwoudt"; and second respondent on appeal (Kubus Kwekery (Edms) Bpk, second applicant in the Court a quo) as "Kubus".

E Nieuwoudt is the founder, sole shareholder and sole director of Kubus, a company apparently engaged in the cosmetic industry, having its registered office in Springbok, Cape, and its principal place of business in Parow, Cape. It seems that four other proprietary companies are associated in one way or F another with Kubus: their identities are irrelevant to present purposes.

On 26 October 1984 Coetzer and Rheeder were appointed by the Minister, acting in terms of s 258 (2) of the Companies Act 61 of 1973, to act as inspectors under the Act for the purpose of investigating and inquiring into the affairs of Kubus and the G four other companies, and thereafter to report to the Minister thereanent.

On 7 November 1984 Coetzer and Rheeder presented themselves at the office of Nieuwoudt in Cape Town, removed a variety of documents relating to the affairs of Kubus and one other of the four companies and requested Nieuwoudt to appear before them on 8 November 1984 for examination. Nieuwoudt duly did so, H accompanied by his counsel (Mr P B Hodes SC) and his attorney. He found that another senior counsel, Mr Viljoen SC and a junior counsel, were also present. It appeared that the intention of the inspectors, Messrs Coetzer and Rheeder, was that Mr Viljoen should conduct the questioning of Nieuwoudt into the affairs of himself and Kubus. Mr Hodes immediately I objected to this proposal, drawing the attention of the inspectors to the provisions of ss 258 - 260 of the Companies Act and contending that it was not competent for the inspectors to delegate to counsel the function of examining Nieuwoudt. It was contended that this function had to be conducted by the inspectors personally. The inspectors rejected this submission. They informed Nieuwoudt that they intended Mr Viljoen to J conduct the questioning on their behalf. Nieuwoudt thereupon (via Mr Hodes) requested and was

Baker J

granted an adjournment in order to approach this Court for an A interdict preventing the inspectors from delegating their functions as contemplated by them.

On 9 and 12 November 1984 an application for a declarator and an interdict came before AARON AJ as a matter of urgency. After hearing argument from both sides AARON AJ granted the order set B out below, his reasons following on 14 November. The terms of the declarators and interdict sought by Niewoudt on behalf of himself and Kubus appear from the order, which reads as follows:

"... an order

(a)

C declaring

(i)

that only inspectors appointed under and by virtue of the powers conferred on first respondent by s 258 (2) of the Companies Act 1973 to investigate the affairs of second applicant and the companies Cleosec (Pty) Ltd, Equity Bankcorp SA (Pty) Ltd, A & E Verspreiders (Edms) Bpk and EBSA (Edms) Bpk D are entitled to interrogate first applicant and any other person in connection with the aforesaid affairs in terms of s 260 (2) of the Companies Act 1973;

(ii)

that no other person, whether he be an advocate or attorney, is entitled to question first applicant or any other person during interrogation by the inspectors in E terms of s 260 (2) of the Companies Act 1973;

(iii)

that no advocate or attorney acting for first, second or third respondents, or for any other inspector who may be appointed, may be present during an interrogation by F the inspectors;

(b)

prohibiting respondents from permitting first applicant or any other persons to be questioned by any person other than the inspectors;

(c)

that the costs of the application be paid by first, second and third respondents jointly and severally G such costs to include the costs of two counsel."

(I may remark that order (a) (iii) was not foreshadowed by a similar prayer in the notice of motion, but was made in consequence of an amendment sought by Mr Hodes at the invitation of Mr Viljoen during the course of the argument. Nothing turns on this.)

The Minister and the two inspectors applied for and were given H leave to appeal to the Full Bench of this Division. On 19 November their notice of appeal was filed. It was an appeal against the whole of the judgment of AARON AJ. It reads as follows:

"(a)

Die agbare Hof het fouteer deur te bevind dat respondente nie op die bystand van I regsverteenwoordigers geregtig was by ondervraging van eerste applikant ingevolge die bepalings van art 260 (2) van die Maatskappywet nie; en/of

(b)

die agbare Hof het fouteer deur te bevind dat die 'redelike noodsaaklikheid' vir sodanige ondervraging nie op die stukke aangetoon was nie en dat die aansoek J vir die genoemde rede moes slaag; en/of

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(c)

A die agbare Hof het fouteer deur te bevind dat die feit dat die ondersoek privaat was die inspekteurs se reg op regsbystand uitgesluit het; en/of

(d)

die agbare Hof het fouteer met sy vertolking van die betekenis van art 260, en in besonder art 260 (2) en B 260 (5) van die Maatskappywet."

Since the judgment of AARON AJ (to the best of my knowledge) is the first written in this country on the question as to whether inspectors appointed under s 258 (2) to investigate the affairs of a company and to report thereon are entitled to call in the assistance of counsel to interrogate those persons whom the C inspectors propose to examine the terms of s 260, I consider it only right to quote the entire judgment of the learned Judge at this point and to incorporate it in this one. That judgment reads as follows, omitting only the introduction which I have expanded so as to give a fuller version of the events leading up to the application, and the order which I have already set out in full supra :

D "Counsel were not able during argument to refer me to any decisions in our Courts in which the procedure to be followed by the inspectors during an interrogation in terms of s 260 of the Companies Act has been discussed. I have not myself been able to find any. The sections of the Companies Act which provide for investigations were taken over from the English companies legislation, with certain amendments. There have been a number of cases in England in which the nature of the E proceedings has been discussed and these cases can therefore provide some guidance as to how the sections should be construed.

It was held in England as far back as 1897 that an enquiry made by the Board of Trade under the corresponding sections of the Act then in force in England was not a judicial enquiry and that its sole object was to examine into and ascertain facts to enable the inspector to make a report of his opinion to the Board of Trade (Re Grosvenor & West-end Railways Terminus Hotel F Co Ltd [1897] 76LT 337 (CA)). One consequence of finding that the investigation is not a judicial inquiry is that it should be held in private.

In 1932 the House of Lords was called upon to consider whether an examination by an inspector held under similar provisions of the Friendly Societies Act 1896 and the Industrial Assurance Act 1923 could be conducted in public (Hearts of Oak Assurance Co Ltd v Attorney-General 1932 AC 392).

G At 395 - 6, Lord THANKERTON is reported as having said:

'There is no express provision (in either Act) as to whether the examination is to be in public or in private, or as to any discretionary power in the matter. The solution of the question, in my opinion, will rest mainly on a consideration of the nature and purpose of the examination...

It appears to me to be clear that the object of the examination is merely to recover information as to the company's affairs H and that it is in no sense a judicial proceeding for the purpose of trial of an offence; it is enough to point out that there are no parties before the inspector, that he alone conducts the inquiry, and that the power to examine on oath is confined to the officers, members, agents and servants of the company. The information so gained by the Commissioner, either by himself or from the report of an inspector, will enable him to decide whether to take action under ss (2) of s 17. If he I takes so serious a view of the situation as, in the case of a society, to award dissolution or, in the case of a company, to petition for winding up, the society or company respectively will have the opportunity of having the whole matter judicially investigated, in the case of a society in an appeal, and, in the case of a company, by opposing the petition...

Except in so far as the statutory provisions otherwise direct, it seems to me that the affairs either of a collecting society or of an industrial assurance company are their own domestic J matter and that, therefore, in the absence of any statutory provision providing otherwise, the examination under s 17 of the

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Act of 1923 ought not to be conducted in public. The A Commissioner cannot properly deal with the situation disclosed by the examination until the latter is completed, and it would seem to be of importance that the credit of the society or company and the confidence of its policy-holders should not be open to any risk before the Commissioner has decided on what steps, if any, it is expedient for him to take. If the examination were to...